How to Be a Changemaker...

The leadership skills that worked in the past are quickly becoming irrelevant in today's fast-paced, change-is-the-name-of-the-game world. To be effective, you need to know how to adapt to and drive change. Here are the six core skills that can turn you into a changemaker:

• Bring people together who aren't connected.
• Design new business models by combining players and resources in new ways.
• Persevere with an idea until you see success.
• Don't rely on credentials, but on the power of your ideas.
• Persuade others to see the possibility of your ideas and join you in the pursuit.
• Empower others to also make change.
(Source: Harvard Business Review)
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Having Ideas Versus Having a Vision

I read an interesting article in Harvard Business Review which I want to share with the readers of my blog.....

In the past decade, firms have been praised for ideas. Experts have celebrated the power of brainstorming and idea-generation techniques. Businessmen have been asked to improve their creative attitudes. And 2009 was named the Year of Creativity and Innovation by the European Union.

One consequence of a decade focused on idea generation is ideas are now more easily accessible, which has also made idea generation less of a differentiator in competition than it has traditionally been. When more than 30% of the population belongs to the creative class, ideas are not in short supply. And with the diffusion of open innovation processes, ideas competitions, and the like, executives are increasingly exposed to a wealth of ideas.

What is in short supply, are visionary thinkers who will be capable of making sense of this abundance of stimuli — visionaries who will build the arenas to unleash the power of ideas and transform them into actions.

Could the next decade be the decade of vision building? If so, we will witness a significant shift in the way we think about innovation, creativity, and leadership. Popular studies of creativity have equated it with the fast generation of numerous ideas (the more, the better); in contrast, visionary leadership requires a relentless exploration of one direction (the deeper and more robust, the better). Vision building is based on research and deep understanding. To generate fresh ideas we need to think outside of the box and then jump back in; vision building destroys the box and builds a new one. It does not play with the existing paradigms; it changes them. Studies of idea generation have lingered on variety and divergence, but vision building is based on convergence, on bringing others onboard.
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The new Japanese consumer

The attitudes and behavior of Japanese consumers are shifting dramatically, presenting opportunities and challenges for companies in the world’s second-largest retail market.

After decades of behaving differently, Japanese consumers suddenly look a lot like their counterparts in Europe and the United States. Celebrated for their willingness to pay for quality and convenience and usually uninterested in cheaper products, Japanese consumers are now flocking to discount and online retailers. Sales of relatively affordable private-label foods have increased dramatically, and many consumers, despite small living spaces, are buying in bulk. Instead of eating out, people are entertaining at home. Workers are even packing their own lunches, sparking the nickname bento-danshi, or “box-lunch man.”

This fundamental shift in the attitudes and behavior of Japanese consumers seems likely to persist, irrespective of any economic recovery. That’s because the change stems not just from the recent downturn but also from deep-seated factors ranging from the digital revolution to the emergence of a less materialistic younger generation.

It also suggests the kinds of moves—such as rethinking relationships with customers and becoming more flexible about sales channels—that businesses must take to seize the opportunities created by Japan’s new normal.
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What’s next for global banks?

Banking giants in emerging markets will probably do well in any likely economic scenario. Other banks face a more challenging future.

In 2008, as the credit crisis broke, banks underwent near-death experiences on a massive scale. Last year, many enjoyed a recovery that was nearly as abrupt. In the intense uncertainty that ensued, bankers around the world have rightly shifted their focus away from growth and toward survival as they confront ambiguity about markets, risk, regulation, and demand.

Amid such extreme mood swings, long-term structural changes now under way will fundamentally affect banking in the years to come. To understand these changes, McKinsey undertook research that combined a historical view of the industry with an analysis of 25 global banks to see how various portfolios of banking businesses and geographic distributions would fare under different macro and regulatory scenarios. Among the findings:

 Under a scenario of lower global economic growth and tough regulatory restrictions, all but emerging-market banking giants will probably destroy value over the next four years. Funding costs will remain high, further hurting profitability.

 Without any management moves, banks of every type will need more capital—as much as $600 billion over the next five years for the 25 banks we modeled. That suggests a real danger of a capital crunch, further forced asset sales, and the need for additional government help.

 The range of performance by banks using similar business models will widen. Big European banking groups, for example, will see returns on equity (ROE) ranging from 9 to 18 percent.

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Countries compete to weaken their currencies

ONCE upon a time, nations took pride in their strong currencies, seeing them as symbols of economic and political power. Nowadays it seems as if the foreign-exchange markets are home to a bunch of Charles Atlas’s 97-pound weaklings, all of them eager to have sand kicked in their faces.

First the dollar took a battering in 2009 when the return of risk appetite, and the ability to borrow the currency at very low rates, sent money flowing out of America for use in speculative “carry trade” transactions. Then the euro got pummelled because of concerns about the euro zone’s exposure to sovereign-debt problems in southern Europe. Finally sterling hit the canvas this week because of concerns about the British government’s deficit and the policy gridlock that may result from a hung parliament after a general election expected in May.

Is there any sign that politicians and central bankers are upset by these depreciations? None at all. Mervyn King, governor of the Bank of England, seems to welcome sterling’s weakness as a boost to exporters. European politicians, such as Christine Lagarde, the French finance minister, have revealed their pleasure at the euro’s recent decline for similar reasons. The American authorities, while parroting their belief in a strong dollar, have done nothing to shore it up, neither raising interest rates nor cutting the fiscal deficit or intervening in the markets.

Nor has there been much sign of rejoicing in those countries whose currencies have tended to strengthen. The Swiss have intervened to hold down the franc. And Japan’s latest finance minister, Naoto Kan, has called for a weaker yen (although he received a rebuke from the prime minister for doing so).

The one country that most economists agree should let its currency rise is China (in theory, faster-growing countries should enjoy real appreciation over the long term). But the People’s Republic also resists the temptation, intervening to stop the yuan from rising against the dollar.

Why are weak currencies so much in favour these days? The answer seems to be that the interests of exporters are paramount, given the desperate scramble for growth that has followed the credit crunch and the global recession.
(Source: The Economist)
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Does India’s government pay any heed to its economic advisers?

ECONOMISTS like nothing better than giving advice to governments. But why do they, of all people, imagine that anyone listens? In their models economists assume that governments, like other actors in the economy, have objectives of their own, which they seek to advance as best they can. They are not disinterested servants of the public good. So governments will ignore a recommendation from their advisers unless it suits them, in which case they would have done it anyway.

In his book “Prelude to Political Economy”, published in 2000, Kaushik Basu of Cornell University wrestled with this paradox. “If, seeing high unemployment in an economy, a person… advises entrepreneurs to employ more labourers, or consumers to demand more goods, this typically causes economists to share a laugh.” And yet economists routinely advise governments to act in the economy’s interests rather than their own.

Mr Basu is now living the conundrum he theorised about. In December he became the chief economic adviser to India’s finance ministry, occupying an office amid the sandstone domes and colonnades of Sir Herbert Baker’s Secretariat buildings in Delhi. On February 25th he released the ministry’s annual economic survey, a day before the minister, Pranab Mukherjee, presented the budget. What advice did Mr Basu give? And did his boss upstairs pay him any heed?

Quintessential
The survey welcomes India’s remarkable escape from both the financial crisis and a disappointing monsoon. The economy is expected to grow by 7.2% in the fiscal year ending on March 31st and it should return to growth of about 9% in the medium term, the survey argues. This government, however, will not settle for any old growth. It has committed itself to “inclusive growth”. The phrase is often invoked, but rarely defined precisely. In the survey Mr Basu offers a “statistical summing up” of what inclusive growth might actually entail.

He proposes that the nation should measure its progress by the growth in per-capita income of the bottom quintile, or 20%, of the population. This simple yardstick gives due weight to both the poor and to growth. Mr Basu cites some figures crunched by S. Subramanian of the Madras Institute of Development Studies (see left-hand chart). They show India’s poor making what Mr Subramanian describes as “a modestly plodding climb out of considerable income deprivation”.

For growth to be inclusive, Mr Basu suggests, it is not enough that the income of the bottom 20% rise at the same percentage rate as the average. Instead, they should get an equal absolute share of the income the economy adds. If the economy grows by $100 billion in a year, the poorest fifth should get $20 billion. That is a high bar indeed. Certainly, it would be impolitic for the government to hold itself to such a demanding standard. But as Mr Basu noted in his book, the adviser’s objectives are not always quite the same as the government’s.

To help the poor plod a bit faster out of deprivation, the government will spend almost 1.9 trillion rupees ($41 billion) this year on social services and rural development—including education, health and a workfare scheme for the rural poor—by the end of this fiscal year. That some of this money has reached the poor, Mr Basu argues, is demonstrated by the rising price of the foods they buy. Indeed, inflation (or “skewflation”, as Mr Basu calls the lopsided rise in prices) is now the government’s biggest political headache (see right-hand chart).

One puzzle is why the government has not quashed food prices by releasing more grain from its overflowing stockpiles. There is, after all, little point holding a buffer stock if you never run it down. “If there are certain minimal amounts of grain that we are committed to holding at all times,” Mr Basu points out, “then it is the same as not holding them.” When the government has released grain, it has also made the mistake of doling it out in hefty batches to a handful of suppliers, who can then corner the market between them. In January the government sold smaller batches of grain to a larger number of traders, with far greater effect on prices. In this case, economic logic revealed a more effective means to the government’s chosen end.

Another way the government purports to help the poor is to subsidise grain and fuel, selling them at controlled prices through “ration shops” to the poor. Some propositions, Mr Basu writes, seem obvious with a little thought, but far from obvious with a lot of thought. Price controls are one of them. It seems clear at first blush that one can cushion the poor from the vagaries of the market by regulating the prices of basic necessities, like food, fuel and fertiliser. But a good economic adviser knows better. Mr Basu points out that ration-shopkeepers divert much of the subsidised grain on to the open market, adulterating the remaining grain with gravel. Reetika Khera of the Centre for Development Economics in Delhi has found that in some states, when market prices rise the poor paradoxically get less subsidised grain, because so much is diverted. It would be better, Mr Basu argues, to give the money to the poor directly, through food, fertiliser or fuel coupons, which they could spend anywhere they please.
Has his boss heeded any of this advice? The government recently decided to raise the price of urea, a fertiliser. Mr Mukherjee also increased import duties and production taxes on fuel. This will help him reduce the central government’s fiscal deficit to 5.5% in the next fiscal year, down from 6.7% this year. It also prompted the opposition and some of the ruling coalition’s own allies to walk out in the middle of his speech. Thanks to these measures, fuel prices will be higher—but no freer. Shortly before the budget an expert committee headed by another economist urged Mr Mukherjee to liberalise the prices of petrol and diesel. In his budget Mr Mukherjee left that decision to his cabinet colleague at the petroleum ministry. The government’s economic advisers, both in the finance ministry and outside it, may not be pleased by this dodge. But at least one of them should not be surprised by it.
(Source: The Economist)
(Image source: Zazzle.com)

Introductions Are Much More than Icebreakers

This is a case study published in Harvard Business Review.

Atul Gawande explains that complicated processes like surgery, where human error can lead to tragedy, require checklists. One of the most important, but often seen as superfluous, steps in his Surgical Safety Checklist is to make sure everyone in the operating room knows each other by name. Gawande found that when introductions were made before surgery, the average number of complications and deaths fell by 35%. He attributed this dip to the "activation phenomenon": Having gotten a chance to voice their names, people were much more likely to speak up later if they saw a problem.

Just as much as hearing or saying your name can boost your confidence, not hearing your name can hurt your performance. As leaders, it's imperative to surround ourselves with people who will voice their opinions. And, given the complex hierarchical constructs within our firms, we must grant them permission to do so. Lucky for us, as Gawande's experiment proved, empowering employees can be as simple as asking their names.
(Source: Harvard Business Review)
(image source: Weblo.com)

RMB - USD Exchange Rate once again creates Furor

Recently the RMB exchange rate against the dollar has raised a new round of confrontation between China and the United States. Last week, 15 members from the US Senate sent a letter to the Department of Commerce, asking the Obama administration to bring a transparency in the exchange rate; otherwise it would undermine manufacturing in the US.

The letter which was signed jointly by 10 Democratic senators and 5 Republican senators and sent to the Secretary of Commerce, Gary Locke said that, the Commerce Department did not properly investigate the issue of the RMB-dollar exchange rate, which has resulted in China manipulating the RMB exchange rate at a low level, so as to profit in the bi-lateral trade.

Although the United States has repeatedly put pressures on the Chinese government to free the RMB exchange rate, the Chinese government is very firm in the attitude of "holding stability" of the RMB exchange rate. Chinese industry sources point out that for every one percentage point of RMB appreciation, would mean a one percent reduction in net profit margins of labour-intensive industries and since at present these industries are netting a average net profit of just 3-5 percent in their operation, it would prove to be disastrous for the economic potential of the export sector in China.
(Image source: China-shjy.com)